Explain how a business chooses to set output
What will be an ideal response?
Revenue - total costs= profit
To maximize profits, a business must identify the amount of labor that will enable the company to achieve the widest gap between revenue and costs.
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The principal-agent problem of ownership vs. control of the corporation tends to get worse when
A) stock in a corporation is held exclusively by a small number of people who control the company's day-to-day operations. B) stock in the company is tightly held, but there are some "outsider" stockholders. C) stock in the company is very diffusely held, with no individual or group having control over a large block of stock. D) managers have profit-sharing schemes as part of their incentive package. E) managers focus on maximizing the firm's profits, rather than the firm's market share.
According to the law of supply:
a. more of a good is desired by consumers as the price falls. b. less of a good is desired by consumers as the price rises. c. more of a good will be offered by suppliers as the price rises. d. less of a good will be offered by suppliers as the price rises.
Suppose a profit-maximizing firm in a competitive market produces rubber bands. When the market price for rubber bands falls below the minimum of its average total cost, but still lies above the minimum of average variable cost, in the short run the firm will
a. experience losses but will continue to produce rubber bands. b. shut down. c. earn both economic and accounting profits. d. raise the price of its product.
The situation where a country can produce a good at a lower opportunity cost than another country is called a(n) __________ advantage
A) permanent B) transitory C) absolute D) comparative E) natural